The barrage of Black Friday advertisements might have many tempted to whip out their wallets, but experts caution against unnecessary discretionary purchases this year amid inflation and the skyrocketing cost of living.
But reigning in spending is much easier said than done. Bruce Winder, a retail analyst with over two decades of experience, recommends consumers approach this year’s season of super sales with two strategies in mind: preparation and research.
“Most people see Black Friday as the kick off to the holiday spending season, and it’s true that it can be a great way to save money with some of those intense bargains,” he said.
“But it’s also important to know that not every deal is a good one.”
Many retailers prepare for the sale months in advance by bulking up manufacturing of selected sale items so they can be sold at heavily discounted prices, or marking down excess inventory. However, retailers’ main source of Black Friday revenue rarely comes from their most dramatically discounted items, Winder said.
“Where they tend to make a lot of their money is on those middle-of-the-road items you pass by when you’re drawn to a store or website by those other, more intense deals,” he said.
“So, you might find yourself buying items that are 20 to 30 per cent off — since you’re in the store or online anyways — giving you the feel of Black Friday without the aggressive savings.”
This is where consumers may find themselves lured into buying more than they intended or needed to, and where planning your purchases before heading out on Black Friday is especially important, said Kelly Ho, a Vancouver-based certified financial planner.
“Black Friday can be a really great opportunity to save on things that we need, but when it comes to cash flow, that’s really how it needs to be framed — as a need, or even as a discretionary expense you can actually afford,” said Ho.
When it comes to making room for discretionary spending, Ho recommended Canadians start by setting concrete financial goals based on how they want the next few years of their life to look.
“As a professional, I’m not here to tell you to not buy this or not buy that — what I care about is the bottom line,” she said. “So at the end of the day, it’s really about asking yourself, ‘Do you want this more, or do you want this more?’”
Winder also noted that researching potential purchases is crucial before going into the Black Friday sales season.
He warns some retailers might increase the price of an item a month or so before reducing it on Black Friday, making it appear as though they’ve significantly slashed the price, when the difference may be marginal in reality. They may also advertise sale items — in particular, popular electronics like laptops and cellphones — with prices comparable to better-quality products that have higher specs or more perks.
However, what Winder predicts millennials and gen Z will need to look out for the most this year are “buy now, pay later” promotions, where customers can make large purchases and pay them off in instalments over time.
“It’s not a deceptive practice, but it’s one of those things that as a shopper, you need to be careful of,” he said, “because you might forget that you’ve bought a lot of stuff, and suddenly, you get these surprise bills.”
For young Canadians in particular — whose cash flow may be limited due to student loan repayments, high rental costs, and other expenses — these additional payments can pose a serious threat to their financial goals, though they may seem like attractive offers initially.
Ho added that being aware of these kinds of marketing tactics, as well as others like free shipping tied to a minimum spending amount, is essential to reduce the likelihood of getting caught up in the Black Friday hype.
“These may be things that people are aware of as problematic generally, but when you’re in the mindset of spending, it can be easier to be susceptible to them,” she added.
“So doing your research and having a list of what you really want and need before shopping will help to keep things in check.”
And if shoppers are looking at Black Friday as a way of finding the perfect gifts for friends and family on a newly shoestring budget, said Winder, one of the most important things may be learning to re-adjust what we expect of ourselves and others this year.
“You know, people are shy about talking about what they can and can’t afford,” he said.
“But it’s a tough time, and it’s OK to tell friends and family that you need to cut back a bit — you just need to give yourself permission to do so.”